Originally published December 13, 2010

Keywords: Supreme Court, generic drugs, failure-to-warn claims, Telecommunications Act, local exchange carriers

Late Friday, the Supreme Court granted certiorari in two cases of interest to the business community:

  • Generic Drugs—Food, Drug, and Cosmetic Act—Preemption of Failure-To-Warn Claims
  • Telecommunications Act of 1996—Access to Incumbent Local Exchange Carriers' "Entrance Facilities"

Generic Drugs—Food, Drug, and Cosmetic Act—Preemption of Failure-To-Warn Claims

The Federal Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. 301 et seq., sets out the process through which generic drug manufacturers receive approval to market their products. First, a name-brand manufacturer must have obtained FDA approval of the drug and the drug's proposed labeling. Then, manufacturers seeking to market generic forms of the previously approved drug may submit an abbreviated application, which must demonstrate, among other things, that the generic drug's labeling will be identical to that approved by the FDA for its name-brand equivalent.

The Supreme Court granted certiorari in and consolidated PLIVA, Inc. v. Mensing, No. 09-993, Activas Elizabeth, LLC v. Mensing, No. 09-1039, and Activas, Inc. v. Demahy, No. 09-1501,to decide whether these federal labeling requirements preempt state-law failure-to-warn claims against generic drug manufacturers. The Court has previously held, in Wyeth v. Levine, 129 S. Ct. 1187 (2009), that similar claims against name-brand manufacturers are not preempted.

Mensing and Demahy, the respondents in the Supreme Court, allegedly developed tardive dyskinesia after taking metoclopramide, the generic form of the drug Reglan, for several years. Each sued the generic manufacturers of metoclopramide, asserting that the drug's labeling contained insufficient warnings about the risk of tardive dyskinesia, and that this violated the manufacturers' state-law duty to warn. 

The generic manufacturers argued that, because the FDCA requires their labeling to be the same as the name-brand's labeling, they were incapable of changing the labeling to satisfy any duty imposed by state law. According to the generic manufacturers, this conflict between the FDCA and state-law duties meant that the FDCA preempted the plaintiffs' state-law failure-to-warn claims.

In their respective decisions below, the Fifth and Eighth Circuits each disagreed, and held that the FDCA did not preempt claims against the generic manufacturers. According to the Eighth Circuit, "a generic manufacturer must take steps to warn its customers when it learns it may be marketing an unsafe drug." 588 F.3d 603, 608. While FDCA regulations dictated that these steps could not include unilaterally altering a drug's labeling, a generic manufacturer could propose a labeling change to the FDA or propose that the FDA issue a warning letter to doctors. Thus, the Eighth Circuit held, state law failure-to-warn claims based on a manufacturer's failure to make such proposals are not preempted.

The Fifth Circuit agreed, but also held that the FDCA did not prevent a generic manufacturer from unilaterally altering a previously approved generic drug's labeling; in the court's view, such labeling must be identical to the name-brand equivalent only at the initial approval stage. Accordingly, the Fifth Circuit held, failure-to-warn claims based on a manufacturer's failure to alter its labels unilaterally also would not be preempted.

After the generic manufacturers petitioned for certiorari, the Supreme Court requested the views of the Solicitor General. The Solicitor General's amicus brief generally agreed with the Eighth Circuit's analysis, but rejected the Fifth Circuit's conclusion that the FDCA permits unilateral labeling changes to generic drugs. The Solicitor General urged against a grant of certiorari, however, observing that there is no conflict in the courts of appeals. The Supreme Court nevertheless granted the petitions.

Absent extensions, amicus briefs in support of the petitioners will be due on January 31, 2011, and amicus briefs in support of the respondents will be due on March 2, 2011.

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Telecommunications Act of 1996—Access to Incumbent Local Exchange Carriers' "Entrance Facilities"

On Friday, the Supreme Court granted certiorari in two cases addressing whether the Telecommunications Act of 1996 requires incumbent local exchange carriers ("ILECs") to provide competitive local exchange carriers ("CLECs") with access to "entrance facilities"—cables or wires that connect CLEC networks to ILEC networks—at regulated, cost-based rates. The two cases, Talk America Inc. v. Michigan Bell Telephone Co., No. 10-313, and Isiogu v. Michigan Bell Telephone Co., No. 10-329, have been consolidated.

The case is of great importance to the telecommunications industry. It will likely resolve a split among the lower courts as to ILECs' obligations under the 1996 Act, and in so doing directly affect the terms on which ILECs must provide CLECs with access to their network facilities and equipment. Before Congress passed the 1996 Act, local telephone service was thought to be a natural monopoly. The 1996 Act was intended to promote competition among local service providers.   

Among the obligations that the 1996 Act imposed on ILECs are those set forth in Section 251(c) of the Act. Under Section 251(c)(2), ILECs must provide "interconnection" for the CLEC's facilities and equipment with the ILECs' networks. 47 U.S.C. § 251(c)(2). Additionally, Section 252(c)(3) requires ILECs to provide CLECs the opportunity to lease network elements "on an unbundled basis." Id. § 251(c)(3). The leasing rates of "unbundled" network elements are regulated; as such, they may not exceed Total Element Long Run Incremental Cost ("TELRIC"), which yields rates "well below the costs the ILECs had actually historically incurred in constructing the elements" in the first place, and are also below tariffed rates that ILECs have long charged when leasing access to their network elements. U.S. Telecom Ass'n v. FCC, 359 F.3d 554, 562 (D.C. Cir. 2004). Section 251 also states that, when determining which network elements should be "unbundled," the Federal Communications Commission ("FCC") must consider whether the ILECs' "failure to provide access to such network elements would impair the ability of [a CLEC] to provide the services that it seeks to offer." 47 U.S.C. § 251(d)(2)(B). Shortly after passage of the 1996 Act, the FCC interpreted Section 251(c)(3)'s "unbundling" provision to include ILECs' leasing rates for all "interoffice transmission facilities" on the ground that the CLECs' ability to provide telecommunication services otherwise would be impaired. The FCC's interpretation extended to ILECs' "entrance facilities." However, in February 2005, the FCC issued its Triennial Review Remand Order ("TRRO"), in which it clarified that Section 251(c) does not require ILECs to provide to CLECs "unbundled" access to "entrance facilities." As the FCC explained, the CLECs were not "impaired" by paying competitive market rates to use the "entrance facilities," and thus did not qualify for receiving the regulated, lower TELRIC rates.

Michigan Bell Telephone Co. (now known as AT&T Michigan) is an ILEC that provides intrastate telecommunications service in Michigan. After passage of the 1996 Act, Michigan Bell had charged CLECs the TELRIC rates for the use of its facilities. However, once the FCC issued the 2005 TRRO, Michigan Bell sought to charge CLECs higher market rates to access its "entrance facilities." The CLECs, in turn, filed a complaint with the Michigan Public Service Commission, arguing that, the TRRO notwithstanding, Section 251(c)(2) includes the obligation to provide CLECs access to "entrance facilities" because CLECs use those facilities to "interconnect" with the ILECs' networks. Moreover, the CLECs argued, because the FCC has applied the TELRIC rates to facilities under both Section 251(c)(2) and Section 251(c)(3), the rates that the CLECs had been paying for "unbundled" "entrance facilities" should still apply. The Public Service Commission agreed with the CLECs, concluding that that the TRRO did not change the ILECs' obligation under Section 251(c)(2) to provide "entrance facilities" used for interconnection purposes, and ordering Michigan Bell to continue to provide access to "entrance facilities" at TELRIC rates. Michigan Bell challenged the Public Service Commission's order in court. The district court, finding that the Public Service Commission had incorrectly conflated the terms "entrance facilities" and "interconnection facilities," reversed the Public Service Commission's order as inconsistent with the TRRO. 

The CLECs, the Public Service Commission's individual members, and Talk America, Inc. (as intervenor), appealed the district court's decision. A divided panel of the Sixth Circuit affirmed, holding that because Michigan Bell "offers its CLECs an interconnection facility at TELRIC rates and entrance facilities at competitive rates," its actions were in "perfect accordance with the plain language of the TRRO." 597 F.3d 370, 386. The Sixth Circuit based its holding in large part on a "plain-language" translation of the TRRO that, the court explained, demonstrated that "entrance facilities" and "interconnection facilities" are two separate concepts under the 1996 Act, and thus could be priced at different rates pursuant to the TRRO. Furthermore, the Sixth Circuit relied on its translation of the TRRO to find unpersuasive the Seventh Circuit's opinion in Illinois Bell Telephone Co. v. Box, 526 F.3d 1069 (7th Cir. 2008), and the Eighth Circuit's decision in Southwestern Bell Telephone L.P. v. Missouri Public Service Commission, 530 F.3d 676 (8th Cir. 2008), in which those courts held that ILECs must allow CLECs access to "entrance facilities" for interconnection at TELRIC rates; according to the Sixth Circuit, the Seventh and Eighth Circuits' holdings conflicted with "the plain language of the TRRO." 597 F.3d at 386.

The Public Service Commission's members and Talk America each petitioned the Supreme Court to review the Sixth Circuit's decision. The Public Service Commission's members asked the Court to address two questions: first, whether the 1996 Act and the TRRO permit ILECs to charge CLECs competitive market leasing rates for "entrance facilities"; and second, whether the Sixth Circuit afforded the level of deference due an FCC amicus brief under Auer v. Robbins, 519 U.S. 366 (1999), when the court translated the TRRO into "plain language." Talk America, in turn, asked the Court to consider whether the TRRO barred the Michigan Public Service Commission from requiring ILECs to offer CLECs access to "entrance facilities" at TELRIC rates under Section 251(c)(2). Although it prevailed before the Sixth Circuit, Michigan Bell agreed that the Court should grant certiorari to resolve the conflict between the Sixth Circuit and several courts of appeals on whether ILECs must allow CLECs access to "entrance facilities" at TELRIC rates. As Michigan Bell pointed out, the Sixth Circuit's opinion conflicts with those of the Seventh and Eighth Circuits, as well as Pacific Bell Telephone Co. v. California Public Utilities Commission, 597 F.3d 958 (9th Cir. 2010), a decision of the Ninth Circuit issued after the Sixth Circuit's decision in this case. The Court granted both petitions. 

Absent extensions, amicus briefs in support of the petitioners will be due on January 31, 2011, and amicus briefs in support of the respondent will be due on March 2, 2011.

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Today, the Supreme Court invited the Solicitor General to file a brief expressing the views of the United States in the following case of interest to the business community:

Applera Corp. v. Enzo Biochem, No. 10-426. The question presented is whether, as held by the Federal Circuit, a patent claim satisfies the requirements of 35 U.S.C. § 112, according to which a patent must include "claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention," so long as the claim is not "insolubly ambiguous" or is capable of being construed.

Please visit us at www.appellate.net.

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